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Lecture 2

Company Law – 79365/0

B.Bus. (University of Technology, Sydney)

Registration and its consequences

@ Taylor’s Business School (Kuala Lumpur)

materials prepared by Elvin Tan

 

Issues before Registration

Types of companies [ref Sec. 112(1)]

Public

Proprietary (Small and Large) [ref. Sec. 113]

Industry-related companies

Companies for professionals [ref. Sec. 115]

Mining companies [ref. Sec. 112(2) & (3)]

Government regulated industry (e.g. banking, insurance, airline etc)

Classification of companies

Limited by Shares

Limited by Guarantee

Unlimited

No Liability

Related companies

Subsidiary

Wholly owned subsidiary

Ultimate holding company

Related companies (sometimes called "sister companies")

Issues posed by corporate groups [ref. "Lifting of corporate veil"]

Registration Process

Corporate Name

Requirements

Availability of name

Publication and display of name

Misuse of identical or similar name

Procedure

Application for registration [Lipton – Fig. 2.1]

Replaceable rules and constitution

Fees

Certificate of registration

Post-registration [Lipton – Fig. 2.2]

Basic requirements (records, minutes, registers, shares etc)

Importance of notifying ASIC

Effects of registration

Separate legal entity

Salomon v. Salomon & Co. Ltd. [1897] AC 22

Lee v. Lee’s Air Farming Ltd. [1961] AC 12

Macaura v. Northern Assurance Co. Ltd. [1925] AC 619

Walker v. Wimborne (1976) 137 CLR 1

Industrial Equity Ltd. v. Blackburn (1977) 137 CLR 567

Pioneer Concrete Services Ltd. v. Yelnah Pty. Ltd. (1987) 5 ACLC 467

Perpetual succession

Sued and being sued

Power to own property

Lifting of corporate veil

By statute

Insolvent trading [ref. Sec. 588G]

Uncommercial transaction(s)

Certain charges void [ref. Sec. 267]

Financial assistance [more in Lecture 6]

Taxation legislation

At common law

Fraud

Avoidance of legal obligation

Involvement with the breach of director’s duty

Attributing mind and will of company

Within corporate groups

Insolvent trading by subsidiary [ref. Sec. 588V – X]

Benefit of group as a whole

Moving targets

Consolidated financial statements

Subsidiaries as agents or partners

Tort liability

Promoters

Who are Promoters

Twycross v. Grant (1877) 2 CPD 469

Active promoters

Passive promoters

Functions of Promoters

Duties of Promoters

Common law duties

Erlanger v. New Sombero Phosphate Co. (1878) 3 App Cas 1218

Gluckstein v. Barnes [1900] AC 240

Statutory duties [more in Lecture 5]

Key is DISCLOSURE

Remedies for breach

Rescission & exceptions

Recovery of secret profits under constructive trust

Liability under Corporations Law

Pre-registration contracts

At common law

Law of agency

Agency clashes with law of contract

Novation

By statute

Application of sec. 131

Ratification after registration

Liability where company is not registered / fails to ratify

Recommended Readings

Readings

Lipton 2001 Chap. 2, 3 & 6 (Aust.)

Baxt 1999 Chap. 4 & 5 (Aust.)

Redmond 2000 Chap. 3 & 4 (Aust.)

Gower 1997 Chap. 5, 6, 7 & 8 (UK)

Woon 1997 Chap. 2 (M’sia & S’pore)

Further readings

Farrar, J., "Frankenstein Incorporated or Fool’s Parliament? Revisiting the concept of the corporation in corporate governance", (1998) 10 Bond Law Review 142
{available from http://www.bond.edu.au/law/blr/vol10-2/2-Farrar.pdf}

McQueen, R., "Life without Salomon", (1999) Vol. 27 No. 2 Federal Law Review [p.??]
{available from http://pandora.nla.gov.au/nph-arch/2000/Z2000-Oct-26/http://law.anu.edu.au/publications/flr/Vol27no2/mcqueen.htm}

Spender, P. "Resurrecting Mrs Salomon", (1999) Vol. 27 No. 2 Federal Law Review [p.??]
{available from http://pandora.nla.gov.au/nph-arch/2000/Z2000-Oct-26/http://law.anu.edu.au/publications/flr/Vol27no2/spender.htm#P-1_0}

Corfield, A., "The Stakeholder Theory and its Future in Australian Corporate Governance: A Preliminary Analysis", (1998) 10 Bond Law Review 213
{available from http://www.bond.edu.au/law/blr/vol10-2/5-Corfield.pdf}

Murphy, D., "Holding Company Liability for Debts of its Subsidiaries: Corporate Governance Implications", (1998) 10 Bond Law Review 241
{available from http://www.bond.edu.au/law/blr/vol10-2/6-Murphy.pdf}